DEFA14A: Air Products Urges Shareholders to Reject Mantle Ridge's Board Nominees, Citing Lack of Experience and Potential Value Destruction

Air Products is actively campaigning against Mantle Ridge's nominees for the Board of Directors, asserting their lack of relevant experience and potential to disrupt the company's strategic direction and long-term value creation.

Summary

• Air Products is urging shareholders to vote for its nominees at the upcoming Annual Meeting on January 23, 2025, and to reject the nominees put forth by Mantle Ridge.
• The company argues that Mantle Ridge's nominees lack the necessary experience and expertise to oversee Air Products' two-pillar growth strategy, which focuses on the core industrial gas business and the clean hydrogen market.
• Air Products claims that Mantle Ridge's nominees have a track record of value destruction and mismanaged succession processes at other companies.
• The company highlights the qualifications of its own nominees, including new nominees Alfred Stern and Bhavesh V. (Bob) Patel, emphasizing their experience leading major publicly listed industrial companies.
• Air Products is in the process of an orderly CEO transition, expected to name a President by March 31, with a definitive succession timeline to follow.
• The company emphasizes its commitment to long-term shareholder value creation and the successful execution of its clean hydrogen strategy, including securing offtake agreements and equity partners for key projects.

Sentiment

Score: 6

Explanation: The document is primarily defensive, aimed at persuading shareholders to reject Mantle Ridge's nominees. While highlighting positive aspects of Air Products' strategy and performance, the overall tone is cautious due to the ongoing proxy battle.

Positives

• Air Products is actively managing its CEO succession, aiming for a smooth transition.
• The company is focused on growing its core industrial gas business and capitalizing on the clean hydrogen market.
• Air Products has a clear two-pillar growth strategy.
• The company is committed to long-term shareholder value creation.
• Air Products is bringing in new board members with relevant experience.
• The company has a significant backlog of projects and is focused on securing offtake agreements.

Negatives

• Mantle Ridge is attempting to gain control of the board, potentially disrupting the company's strategy.
• Mantle Ridge's nominees are portrayed as having a track record of value destruction and mismanaged succession processes.
• Mantle Ridge's CEO candidate is described as unqualified and lacking public company experience.
• The proxy contest creates uncertainty and potential instability for the company.

Risks

• The proxy contest with Mantle Ridge could lead to disruption and instability at Air Products.
• Electing Mantle Ridge's nominees could derail the company's long-term growth strategy.
• Failure to execute the clean hydrogen strategy could negatively impact future growth.
• The CEO transition could be disruptive if not managed effectively.
• Global macro challenges could impact the company's performance.

Future Outlook

Air Products aims to continue executing its two-pillar growth strategy, focusing on its core industrial gas business and capitalizing on the clean hydrogen market, while ensuring a smooth CEO transition and delivering long-term shareholder value.

Management Comments

• Our team is seizing on the significant, growing market demand for clean hydrogen, which represents a natural extension of our leading and successful core industrial gas model.
• The long-term strategy outlined by the Board and Management team stands in sharp contrast to Mantle Ridges short-termism and lack of a plan.
• Our future success depends on overseeing an orderly transition of our CEO, Seifi Ghasemi, with someone with strong public company experience, as well as the skills and industry relationships required for this role.

Industry Context

The announcement reflects the increasing focus on clean hydrogen as a growth area for industrial gas companies, with Air Products positioning itself as a first-mover in this market. The proxy contest highlights the ongoing tension between companies and activist investors regarding strategic direction and value creation.

Comparison to Industry Standards

• Air Products' focus on clean hydrogen aligns with industry trends, as companies like Linde and Air Liquide are also investing heavily in this area.
• The company's commitment to securing offtake agreements for its hydrogen projects is crucial, as these agreements provide revenue certainty and de-risk investments, similar to strategies employed by competitors.
• The proxy contest with Mantle Ridge is not unique, as activist investors have become increasingly active in the industrial gas and chemicals sectors, seeking to influence corporate strategy and governance, similar to campaigns seen at companies like DuPont and Dow Chemical.

Stakeholder Impact

• Shareholders will be impacted by the outcome of the proxy contest and the future direction of the company.
• Employees could be affected by potential changes in leadership and strategy.
• Customers and suppliers may experience uncertainty during the proxy battle.
• The company's ability to execute its growth strategy will impact its long-term relationships with stakeholders.

Next Steps

• Shareholders will vote on the director nominees at the Annual Meeting on January 23, 2025.
• Air Products will continue to execute its two-pillar growth strategy.
• The company will name a President by March 31 and provide a definitive CEO succession timeline.

Key Dates

Keywords

Air Products, Mantle Ridge, Board of Directors, Proxy Contest, Shareholder Value, Clean Hydrogen, CEO Succession, Director Nominees, Industrial Gases, Governance